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K E Y F I NDI NGS AND RE SOURCE ST RAT E GY T he Co unc il s Po we r Pla n Goal - Ensure an adequate, efficient and affordable regional power system Major Components Forecast of regional electricity demand over the next

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SLIDE 1

K E Y F I NDI NGS AND RE SOURCE ST RAT E GY

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SLIDE 2

T he Co unc il’ s Po we r Pla n

  • Goal - Ensure an adequate, efficient and affordable

regional power system

  • Major Components
  • Forecast of regional electricity demand over the next 20

years

  • A “least cost with acceptable risk” Resource Strategy
  • Regional action plan to implement Resource Strategy
  • Use
  • By statute, plan guides Bonneville Power Administration’s

resource decisions

  • By tradition, plan serves as an independent reference for

all of the region’s utilities, regulatory commissions and policy-makers

2

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SLIDE 3

T he Se ve nth Po we r Pla n – Ma jo r I ssue s

3

Impact of announced coal-plant retirements on need for new resource development

Centralia 1 & 2 – 1340 MW Boardman – 550 MW North Valmy – 522 MW

Implications of and options for addressing EPA’s Clean Power Plan How to best meet regional need for capacity (i.e., peaking) resources

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SLIDE 4

T he Re g io n’ s Po pula tio n a nd E c o no my Are E xpe c te d T

  • Gro w

114% 120% 127% 126% 136% 0% 20% 40% 60% 80% 100% 120% 140% Population Employment Households Commercial Floor Space Industrial Output Percent Growth 2015 to 2035

4

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SLIDE 5

K e y F inding

  • Energy Efficiency and Demand

Response can meet nearly all growth in energy and capacity needs

5

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SLIDE 6

Ke y F inding: E ne r gy E ffic ie nc y Me e ts L

  • ad Gr
  • wth Ove r

T he Ne xt T wo De c ade s

  • 5,000

10,000 15,000 20,000 25,000 30,000 2015 2020 2025 2030 2035 Regional Load (Average Megawatts)

6

Regional Load Growth Met with Energy Efficiency Regional Load Net of Energy Efficiency Load Reduction from Federal Standards Adopted Post-Sixth Power Plan

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SLIDE 7

Northwe st L

  • a ds Afte r Ac c ounting for E

ne rg y E ffic ie nc y Are F

  • re c a st T
  • Re ma in At or Be low

Curre nt L e ve ls Until 2035

5,000 10,000 15,000 20,000 25,000 2001 2006 2011 2016 2021 2026 2031 Annual Electricity Loads (average megawatts) 7th Plan Net Load After Energy Efficiency 6th Plan Net Load After Energy Efficiency Actual Loads

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SLIDE 8

Ke y F inding: L e ast Cost Re sour c e Str ate gie s Re ly on Conse r vation and De mand Re sponse to Me e t Ne ar ly All F

  • r

e c ast Gr

  • wth in Re gional E

ne r gy and Capac ity Ne e ds

  • 1,000

2,000 3,000 4,000 5,000 6,000 2015 2020 2025 2030 2035 Cumulative Resource Development (aMW) Wind Solar Geothermal Natural Gas Energy Efficiency

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2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2015 2020 2025 2030 2035 Cumulative Resource Development (MW)

Renewable Resources Demand Response Natural Gas Energy Efficiency

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SLIDE 9

Why the Se ve nth Po we r Pla n Re lie s o n E ne rg y E ffic ie nc y a nd De mand Re spo nse Re so urc e s

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Because they cost less!

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SLIDE 10

All Re so urc e Co st – E ne rg y

$0 $20 $40 $60 $80 $100 $120 $140 $160 Energy Efficiency (Average Cost w/ T&D Credit) Energy Efficiency (Average Cost w/o T&D Credit) Solar PV - Low Cost S. ID Natural Gas - CCCT Adv1 Natural Gas - CCCT Adv2 Solar PV - S. ID Wind -MT w/ new transm. Wind - MT w/ Transm. Upgrade Wind - Colum. Basin Natural Gas - Frame GT East Solar PV- S. ID w/ Transm. Expan. Natural Gas - Recip Engine East Natural Gas - Aero GT East Real Levelized Cost (2012$/MWh) Capital O&M + Property Taxes + Insurance Fuel + Transmission

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SLIDE 11

All Re so urc e Co st – Pe a k Ca pa c ity

$0 $50 $100 $150 $200 $250 $300 $350 $400 Demand Response Price Block 1 Demand Response Price Block 2 Demand Response Price Block 3 Solar PV - Low Cost S. ID Natural Gas - Frame GT East Natural Gas - CCCT Adv1 Demand Response Price Block 4 Natural Gas - Recip Engine East Natural Gas - Aero GT East Natural Gas - CCCT Adv2 Solar PV - S. ID Wind - Colum. Basin Solar PV- S. ID w/ Transm. Expan. Wind -MT w/ new transm. Wind - MT w/ Transm. Upgrade Real Levelized Cost (2012$/kW-yr) Capital O&M + Property Taxes + Insurance Fuel + Transmission

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SLIDE 12

K e y F inding

  • Demand Response resources

should be developed to meet regional peak demands

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SLIDE 13

Ke y F inding: T he r e is a high pr

  • bability that at le ast 600 MW of De mand Re sponse

should be de ve lope d ac r

  • ss all sc e nar

ios te ste d

  • 500

1,000 1,500 2,000 2,500 3,000 2015 2020 2026 2031

Cumulative Development (MW)

Existing Policy Social Cost of Carbon - MidRange Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas Regional RPS @ 35%

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SLIDE 14

Ke y F inding:

T he Pr

  • bability and Amo unt of De ma nd Re sponse De ployme nt Va rie s Ove r a Wide

Ra ng e , But T he re is a Ve ry Hig h (70% +) Proba bility of Ne e ding a t le a st 600 MW 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Probability of Deployment Deployment Level (Winter Peak MW)

Existing Policy SCC - MidRange Retire Coal Retire Coal w/SCC_MidRange Retire Coal w/SCC_MidRange No New Gas Increase Market Reliance No Demand Response Regional RPS @ 35% Lower Conservation

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Minimum Probability of 600 MW DR Deployment by 2021 is 70%

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SLIDE 15

K e y F inding

  • Retiring coal plant generation can

be replaced by greater reliance

  • n existing natural gas plants very

limited development of new gas- fired generation

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SLIDE 16

Ke y F inding: E xisting Natur al Gas Offse ts Announc e d Coal Plant Re tir e me nts, Re sulting in L

  • we r

CO2 E missions

  • 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2015 2020 2025 2030 2035

Existing Gas Dispatch (aMW) Lower Conservation Existing Policy Social Cost of Carbon - Mid-Range Retire Coal Retire Coal w/SCC_MidRange Regional RPS @ 35%

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SLIDE 17

K e y F inding

  • No immediate need to acquire or

build new generating resources

  • Unless, regional energy efficiency and

demand response goals are not achieved

OR

  • Unless, additional coal plants are

retired

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SLIDE 18

Pro b a b ility o f Ne e ding Ne w Na tura l Ga s Ge ne ra tio n b y 2021

0% 25% 50% 75% 100% No Demand Response Retire Coal w/SCC_MidRange Lower Conservation Retire Coal Retire Coal and Inefficient Gas Regional RPS @ 35% Existing Policy Increased Market Reliance Social Cost of Carbon - MidRange

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SLIDE 19

K e y F inding

  • Resource strategies that maximize

the use of existing regional resources to satisfy the region’s resource adequacy standards are lower cost, require less resource development and produce fewer emissions

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SLIDE 20

Ke y F inding: Ne t E xpo r ts (E xpor ts- Impor ts) Ar e Str

  • ngly Influe nc e d By

Re gional Re sour c e De ve lopme nt

2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 2015 2020 2025 2030 2035

Net Exports (aMW) Existing Policy Social Cost of Carbon - Mid-Range Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC_MidRange Regional RPS @ 35%

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SLIDE 21

K e y F inding

  • EPA carbon emission reduction

regulations can be met regionally

  • However, some states, especially

Montana, face significant challenges

21

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SLIDE 22

Ke y F inding: Re gional Annual Ave r age CO2 E missions for L e ast- Cost Re sour c e Str ate gie s Ar e Be low E PA’s E mission L imits

  • 5

10 15 20 25 30 35 40 2015 2020 2025 2030 2035

Annual Average CO2 Emissions (MMT)

No Coal Retirement Existing Policy Social Cost of Carbon - Mid-Range Reire Coal w/SCC MidRange & No New Gas

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SLIDE 23

Key Findings: Annual Regional power system CO2 emissions could be reduced by 70 % by retiring all existing coal plants, and 80% if these plants were replaced with Renewable Resources

10 16 16 18 21 26 36 41 47 54

  • 20

40 60

Retire Coal w/SCC_MidRange & No New Gas Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC_MidRange SCC - Mid-Range Regional RPS at 35% Existing Policy Develop 55% Less Energy Efficiency No Coal Retirement* PNW Power System Historical Emissions…

CO2 Emissions in 2035 (MMT)

*Scenario assumes Centralia, Boardman and North Valmy are not retired.

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70%

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SLIDE 24

Key Finding: The Lowest Cost Policies for Reducing Regional Power System CO2 Emissions Impose A Cost on Carbon, The Highest Increase Renewable Portfolio Standards

$349 $170 $100 $78 $23 ($11) ($50) $0 $50 $100$150$200$250$300$350$400

Regional RPS at 35% Retire Coal and Inefficient Gas Retire Coal w/SCC_MidRange & No New Gas Retire Coal Retire Coal w/SCC_MidRange SCC - Mid-Range

PV Carbon Emissions Reduction Cost ( 2012$/MT)

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SLIDE 25

Key Finding:

Increased renewable portfolio standards are not necessary to comply at the regional level with recently promulgated federal carbon dioxide emissions regulations, nor are they an element of a regional least cost resource strategy

  • Why Increasing RPS Isn’t the Least Cost

Option for Reducing CO2 Emissions

  • RPS don’t reduce coal use
  • RPS don’t change the fact that the “wind

don’t blow and the sun doesn’t shine all of the time”

  • RPS lower the amount of cost-effective energy

efficiency

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SLIDE 26

Re so urc e Stra te g y

  • Energy Efficiency Development
  • 1400 aMW by 2021
  • 3000 aMW by 2026
  • 4300 aMW by 2035
  • Expand Use of Demand Response
  • Develop at least 600 MW of demand response resources by 2021
  • Natural Gas
  • Increase use of existing gas generation to offset coal plant retirements
  • While there is a very low probability of regional need for new gas-fired

generation prior to 2021, individual utility circumstances and need for capacity and other ancillary services may dictate development

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SLIDE 27

Re so urc e Stra te g y

  • Renewable Resources
  • Develop local renewable alternatives that are cost-effective now
  • Develop solar PV systems to comply with existing renewable portfolio standards,

especially in areas with increasing summer peak loads

  • Conduct research on and demonstration of renewable energy with a more

consistent output like geothermal or wave energy

  • Carbon Policies
  • Support policies that cost effectively achieve state and federal carbon dioxide

emissions reduction goals, while maintaining regional power system adequacy by:

  • Develop the energy efficiency and demand response
  • Replace retiring coal plants increased use of existing gas-fired generation.
  • Dispatch existing regional generation to meet adequacy standards for energy and

capacity rather than to serve external markets

  • No increasing the requirements of state renewable portfolio standards alone, since this

would not result in the development of the least cost resource strategy for the region nor the least cost resource strategy for reducing carbon at the regional level.

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SLIDE 28

Re so urc e Stra te g y

  • Regional Resource Use
  • Continue to improve system scheduling and operating procedures across the region’s

balancing authorities to maximize cost-effectiveness and minimize the need for new resources to integrate renewable generation

  • Improve use of existing regional resource to meet regional adequacy standards
  • Expand Resource Alternatives
  • Energy efficiency
  • Renewable with less variable output (e.g., enhanced geothermal, wave)
  • Adaptive Management

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SLIDE 29

Questions?

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SLIDE 30

Ba c kup Slide s

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SLIDE 31

Ca rb o n Dio xide E missio n Re duc tio n Po lic ie s

  • Council Tested Multiple Policy Options for Reducing Carbon

Emissions

  • Non-Pricing Policies
  • Existing state and federal policies (RPS & CPP)
  • Retire Coal (all plants beyond those plants already announced)
  • Retire Coal and Inefficient Natural Gas (below 40% efficiency)
  • Increase Regional RPS to 35% of All Retail Sales
  • Pricing Policies
  • Assume carbon cost equivalent to Federal Government’s

estimate of the Social Cost of Carbon (SCC)

  • Mid-Range SCC Estimate ($40/MT in 2016, escalating to $60/MT in 2035
  • 95th Percentile SCC Estimate ($160/MT in 2016, escalating to $180/MT in

2035

  • Non-Pricing Combined with Pricing Policies
  • Retire Coal w/MidRange SCC
  • Retire Coal w/MidRange SCC and Restrict Development to

Renewable Resources

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SLIDE 32

Ke y F inding: Car bon Pr ic ing Polic ie s Dr ive Cumulative E missions Re duc tion and Syste m Cost

50 100 150 200 250 300 350 400 450 500 $0 $20 $40 $60 $80 $100 $120 $140

Existing Policy Retire Coal SCC - Mid-Range Retire Coal w/SCC_MidRange Retire Coal w/SCC_MidRange & No New Gas

Cumulative Emssion Reduction (MMT) Present Value System Cost (billion 2012$) Present Value Average System Cost (2012$) Cumulative CO2 Emission Reduction Over Existing Policy Scenario

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SLIDE 33

Summar y of Car bon Re duc tion Polic y Costs and Impac ts

CO2 Emissions - PNW System 2016 - 2035 (MMT) Cumulative Present Value Average System Cost

  • f Emission

Reduction (2012$) Cumulative CO2 Emission Reduction Over Existing Policy

  • Scenario

(MMT) Incrementa l Emission Reduction (MMT) Increment al Average System Cost (billion 2012$) Incremental Cost of CO2 Emission Reduction (2012$/MT)

Existing Policy $82 $0 $0 Retire Coal $98 197 197 $16 $81 SCC - Mid-Range $78 351 154 ($20) ($130) Retire Coal w/SCC_MidRange $91 377 26 $13 $500 Retire Coal w/SCC_MidRange & No New Gas $126 430 53 $35 $660

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SLIDE 34

Key Finding:

Increased renewable portfolio standards are not necessary to comply at the regional level with recently promulgated federal carbon dioxide emissions regulations, nor are they an element of a regional least cost resource strategy

  • Why Increasing RPS Isn’t the Least Cost

Option for Reducing CO2 Emissions

  • RPS don’t reduce coal use
  • RPS don’t change the fact that the “wind

don’t blow and the sun doesn’t shine all of the time”

  • RPS lower the amount of cost-effective energy

efficiency

34

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SLIDE 35

T wo Car bon E mission Re duc tion Polic ie s Re sult in Signific ant Re ne wable Re sour c e De ve lopme nt

Ave ra g e Annua l Ne w Re ne wa l Re so urc e Ge ne ra tio n Dispa tc h 2015-2035 Unde r Alte rna tive Re so urc e Stra te g ie s

  • 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2015 2020 2025 2030 2035

Annual Average Dispatch (aMW)

Existing Policy Social Cost of Carbon - MidRange Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas Regional RPS @ 35%

35

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SLIDE 36

Ne ithe r

  • f T

he se Polic ie s Signific antly Re duc e Coal Use

Ave ra g e Annua l Co a l Ge ne ra tio n Dispa tc h 2015-2035 Unde r Alte rna tive Re so urc e Stra te g ie s

  • 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2015 2020 2026 2031

Annual Average Dispatch (aMW)

Existing Policy Social Cost of Carbon - MidRange Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas Regional RPS @ 35%

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SLIDE 37

Howe ve r , Inc r e ase d Re lianc e on Re ne wable Re sour c e s Doe s Re duc e Re lianc e on E xisting Natur al Gas Ge ne r ation

Ave ra g e Annua l E xisting Ga s Ge ne ra tio n Dispa tc h 2015-2035 Unde r Alte rna tive Re so urc e Stra te g ie s

  • 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2015 2020 2026 2031

Annual Average Dispatch (aMW)

Existing Policy Social Cost of Carbon - MidRange Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas Regional RPS @ 35%

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SLIDE 38

And, Inc r e ase d Re lianc e on Re ne wable Re sour c e s Doe s De c r e ase Ne w Gas- F ir e d Ge ne r ation De ve lopme nt

Ave ra g e Annua l Ne w Na tura l Ga s Ge ne ra tio n Dispa tc h 2015-2035 Unde r Alte rna tive Re so urc e Stra te g ie s

  • 500

1,000 1,500 2,000 2,500 3,000 2015 2020 2026 2031

Annual Average Dispatch (aMW)

Existing Policy Social Cost of Carbon - MidRange Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC MidRange Regional RPS @ 35%

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SLIDE 39

Inc re a se d Re lia nc e on Re ne wa ble Re sourc e s Produc e s L e ss E ne rg y E ffic ie nc y De ve lopme nt By L

  • we r Ma rke t Pric e s

Cumula tive E ne rg y E ffic ie nc y De ve lo pme nt 2016-2035 Unde r Alte rna tive Re so urc e Stra te g ie s

  • 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2015 2020 2026 2031

Cumulative Development (aMW)

Existing Policy Social Cost of Carbon - MidRange Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas Regional RPS @ 35%

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SLIDE 40

As A Re sult, Inc r e ase d Re lianc e on Re ne wable Re sour c e s (Without Also Re tir ing Coal Ge ne r ation) Pr

  • duc e s the L

e ast Car bon E mission Re duc tions of All Polic ie s T e ste d

Ave ra g e Annua l Ca rb o n Dio xide E missio ns 2015-2035 Unde r Alte rna tive Re so urc e Stra te g ie s

  • 5

10 15 20 25 30 35 40 45 2015 2020 2026 2031

Annual Carbon Dioxide Emissions (MMT)

Existing Policy Social Cost of Carbon - MidRange Retire Coal and Inefficient Gas Retire Coal Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas Regional RPS @ 35%

40